Five things to consider before entering a new market
In Business development, Markets, Planning growth - 2 years ago - 6 min
Five things to consider before entering a new market
Overseas expansion is a big step for any business, says Mike Bell, chief executive of Driven Worldwide. However, there are several factors you should think about before expanding your business overseas.
Entering a new market can be a make-or-break venture for a growing business. For many, overseas expansion is a daunting prospect. Research from FedEx suggests that just 53% of UK small businesses are involved in exporting.
Mike Bell, CEO of personal chauffeur service business Driven Worldwide, understands what it’s like to go through the highs and lows of breaking into a new market. His business has offices in London, New York and Hong Kong, and a presence in around 100 countries.
Here, Mike shares five recommendations for business leaders looking to take that step and enter a new market.
1. Spend time in the country researching
Driven Worldwide’s first foreign venture was in New York. The firm had been operating there via a local provider, but it was clear that there was enough demand and margin to justify going it alone. Mike researched the market and understood it the best he could. “It was a relatively low-risk decision,” he explains. “But we still did plenty of due diligence – you can’t be over-prepared for overseas expansion.”
Mike recommends carrying out desk research, using social listening tools, consulting professional advisers and speaking to colleagues in your professional network who operate in the area. Also, most importantly, he recommends visiting the country and speaking to customers to get a sense of what it’s like on the ground. “You need to know the market in detail,” Mike says. “You must understand its size, its complexities, its rules and regulations and, above all, its customers and their needs.”
2. Some markets aren’t right for you today
It’s also important to grasp the regional variations – especially when you’re dealing with a large market like the US. “When we entered the US market, we found the East and West Coast markets to be completely different,” says Mike. “We soon realised we had to treat them as separate operations.”
If your research finds a less promising outlook than expected, then take heed. Look carefully at the pitfalls and think hard about whether it’s the right decision. “Entrepreneurs tend to be positive, ambitious people, who get excited about the prospect of growth,” Mike points out. “But you must guard against being led by your emotions if an overseas venture risks being troublesome.”
It’s an issue that Driven Worldwide faced with the Brazilian market. The company was operating successfully in the country via a third party and had local contacts that could help pave the way for an owned operation.
“It looked an exciting opportunity, but I spoke to a friend who was already in business in Brazil. He warned me about the huge legal, compliance and taxation complexities involved. You simply have to listen to that sort of experience and advice,” says Mike. “We realised we didn’t have the management structure to cope with that much red tape and stay focussed on running the rest of the business. So we decided not to go in.”
3. Plan your business structure with care
Consider exactly how to set up your overseas operation, which, for Mike, means focussing on several aspects of the business:
- Control – How much autonomy should you give to your local operation, and how readily should you devolve it? What processes will you need to retain the right levels of oversight and control?
- Infrastructure – Your premises and IT systems will have a vital impact on success. Driven Worldwide started its US operation from a serviced office, but soon found it wasn’t sufficient. “It didn’t give us the flexibility or technological capabilities we needed as an international business,” Mike explains.
- Recruitment – “Pay the premium for the best local talent you can find to run your overseas operation,” says Mike. “The extra investment will quickly pay off.”
- Supply chain – Take time to find the right local suppliers for your specific needs. In each market, Driven Worldwide looks for niche suppliers who understand the requirements of its particular client base.
4. Set goals and objectives
Mike stresses it’s also important to understand the implications of growth. “How will you expand your global structure as your overseas business scales up?” asks Mike. “What will the knock-on effects be in terms of tax and regulation in each territory?”
5. Trust facts and feelings
Entrepreneurs like to trust their instincts – because they generally serve them well. But you can’t make decisions on global expansion based on your feelings, Mike cautions. He points to Drive Worldwide’s Hong Kong division as an example. “There was probably more gut feel in that decision than New York,” he explains. “And Hong Kong took longer to turn a profit.”
NEXT UP IN Business development, Markets, Planning growth
At the same time, however, you must never lose sight of your desire for growth. “I’m not suggesting you tone down your passion for your business,” Mike says. “That’s what drives you to succeed, and what convinces talented people to join you. But don’t let it sway your judgment.”
You can find out which export opportunities are out there using Exporting Is Great.
If you are looking for support to grow your business please get in contact with one of our team on 08081 722350 or drop us an email: G.Enquiries@uk.gt.com